The stock markets in the U.S. and Korea have been recovering at the unprecedented speed. So how far will the recovery go? It is evident that no one has a clue to this question – when I look at the headlines of financial section of the news, one expert says something like, ‘the worst is over, and the market will bounce back to an unprecedented level’, while another expert says something like, ‘the worst is still to come’.
I am more inclined to the latter opinion for few reasons. Other than the fact that the economy in the Main st. will be worse in the Q2, there are factors that can cause the market to panic.
First, I believe the U.S. is opening up its economy much too soon and I don’t believe that Remdesivir, a corona virus drug that is receiving the most attention in the media right now, is a safe bet. To me, the fast-track approval of this drug by FDA is extremely worrisome as the side-effects of the drug will probably not be fully known before its use – there is always a high chance of problems occuring when you rush things.
Another reason is the blame games that President Trump likes to use to get out of difficult situations. I just read today in Bloomberg News article (see below) that Trump is considering to take punitive actions. I am sure he will use his power to do so, if his approval rating falls or the market does not come back as quickly as he wishes or whatever the reasons. So the U.S. – China trade war, which is at its phase-I agreement (this was always the big issue moving the market before COVID-19), may move backwards to phase zero or even minus one.
“Trump Says China’s Virus Response Tied to Wish for Him to Lose (09:36 a.m. HK)
President Donald Trump said he thinks that China is determined to see him lose the November election based on Beijing’s response to the coronavirus outbreak.
Trump, in an Oval Office interview with Reuters published Wednesday night, did not provide evidence to bolster his assertion, but said that he was considering various ways to punish the Chinese government, which he has blamed for allowing the virus to spread across the world.
“China will do anything they can to have me lose this race,” Trump said in the interview. He did not say what punitive actions he might take, but added “There are many things I can do.””
Lastly, and I hope it will not occur, but there is a chance that the virus will mutate before a cure is developed. I don’t know how likely it is, but I have been hearing in the news that there were some young children developing symptoms that were not found before.
The market rallies these days are just irrational and it is creating more bubbles daily. When I am on transits, or in cafes, I hear so many people talking about investing in stocks. I hope that people, including myself, be rationale in this time of uncertainty and make prudent decisions.
The unprecedented low-level of interest rates during the last decade has left some countries to spend. Now, with the disruption of the global economy from the COVID-19, the countries with high household debt is likely to be the ones that first fail to survive.
Below is an information on the household debt levels in OECD countries.
Weeks became months. It almost seems now that the situation will never end. The Korean government has been informing that the next two weeks will be the peak, but it sounds like a déjà vu from last week (Maybe they say two weeks to give the public some hope). Good news is that the number of cases has been declining recently.
Most people now wear masks at restaurants, cafes, and even when taking short stroll outside. It make you feel like a criminal to cough without covering your mouth and nose (maybe you are indeed, for spreading the virus). Our family also limited our outdoor activities, contact with neighbours or passerby, and casual dining outside.
How long the COVID-19 will hang in the air is very uncertain now. Just a few weeks ago, I read articles that some experts predict that the situation should be over by July, but recent news about the spread of virus in Europe and North America surely makes me doubt the prediction.
Anyway, the chart below clearly shows how vulnerable Korean market is to the movements in China and the U.S. markets.
When SHCOMP (Shanghai composite index) fell in mid-Jan, KOSPI, albeit in lesser magnitude, followed a similar pattern. KOSPI, SPX and SHCOMP then slowly recovered until Feb. 19th, when SPX began to plunge.
The stock market will eventually recover, maybe soon after the pandemic is over or maybe in a year or more. But just how much of that loss was funded by risky loans? It worries me that the total credit to households in Korea is already high (93.9% as a percentage of GDP, in Q3 2019). It’s only behind 7 countries (Australia, Canada, Denmark, Netherlands, Norway, Switzerland) out of 52 countries measured by the BIS.
From last mid-December to January 2020, I had been working with a group of experts to conduct a preliminary study on the energy efficiency market in Vietnam. The streets were booming with foreigners, reflecting the global interest in the country’s high economic potential, not least since the China and the U.S. trade war. This was different (as far as I can recall) from the impression that I received in 2014, when I first visited the country as a junior greenhouse gas researcher.
Below are some facts about Vietnam:
Vietnamese economy is expected to grow approximately at 6.5% per annum
Vietnam’s electricity generation is highly dependent on hydro (45%), coal (34%) and natural gas (20%) (Source: IEA)
The country became a net energy importer in 2015, primarily increased coal imports
Energy efficiency level is quite low, lots of potential to save energy use
Some other interesting facts (could be biased) that I heard/saw in Vietnam:
Streets are still overloaded with motor cycles fuming emissions
Solar power generation business was hot until recently, exploiting the government’s 20-year feed-in-tariff (FIT) scheme that ended in 2019. (The scheme was extended in Jan 2020)
Expect to have long delays in government administration processes as their admin system is still highly dependent on exchanging paper document
Though a communist country, the government seemed (at least to us) to abstain from intervening the market
Foreigners are not permitted to open a banking account, unless they reside in the country
Although organized very poorly, I hope posting this will allow me to slowly adapt a habit of writing. I will try to write more about Vietnam’s energy efficiency market in the next post.
If you find any wrong facts in the posting, please help me to fix it by leaving it in the comment section! Any other comments are welcomed.
It’s been a long time since I left a post on this personal blog. Since the time I left PwC, I have been assiduously preparing MBA applications (which requires a lot of time and effort) for submission. Meanwhile, I also pondered about how I should use this personal blog.
For now, I plan to write just about anything that interests me. But, I presume the topics will be mostly about global economics, finance, and business, especially on climate change and sustainability.
I wish to promote my blog as an online platform for any individuals (except people who just want to troll) to discuss global issues and find innovative solutions.
*As I am not a professional writer, analyst, reporter, etc., my opinions are limited within the knowledge and experience that I have garnered as an individual.
지난 3년간 몸 담았던 삼일회계법인(삼일PwC)을 떠나게 되었다. 이 곳에 다니면서 느끼고 배웠던 많은 일들은 앞으로 내가 살아가면서 필요한 긍정적인 마인드, 새로운 일에도 도전 할 수 있는 자신감, 그리고 Sustainability and Climate Change 분야에 대한 나의 생각을 더 확고하게 해주었다.
가족이 있는 상태에서 회사를 관두고 나간다는 것이 쉬운 결정은 아니었으나, 지금이 아니면 내가 하고 싶은 일들 도전 해 볼 수 없을 것 같다는 판단에 아내와의 상담 끝에 다시 사막과 같은 세상에 나아가 보기로 결정했다. 마음으로는 불안했을 수도 있지만 이 결정에 따라준 아내에게 고맙고, 앞으로 몇 달 간 또 새로이 달려보고자 한다. 나중에 이 글을 읽게 된다면, 이 때 옳은 결정을 했구나 하고 돌아 볼 수 있도록 열심히 노력할 것이다!